Doing Business 2020 Vietnam Economy Profile Vietnam Page 1 Doing Business 2020 Vietnam Economy Profile of Vietnam Doing Business 2020 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as postfiling processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Employing workers Flexibility in employment regulation and redundancy cost Page 2 Doing Business 2020 Vietnam About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of employing workers. Although Doing Business does not present rankings of economies on the employing workers indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational studies, which exhaustively cover business regulation and reform in different cities and regions within a nation. These studies provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business study, published in 2003, covered 5 indicator sets and 133 economies. This year’s study covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. To learn more about Doing Business please visit doingbusiness.org Page 3 Doing Business 2020 Vietnam Ease of Doing Business in DB RANK DB SCORE Region East Asia & Pacific Vietnam Income Category Lower middle income 70 Population 95,540,395 69.8 City Covered Ho Chi Minh City Rankings on Doing Business topics - Vietnam 25 27 25 64 68 97 104 109 115 122 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Topic Scores 85.1 79.3 88.2 71.1 80.0 54.0 69.0 70.8 62.1 38.0 Starting a Business (rank) 115 Getting Credit (rank) 25 Trading across Borders (rank) 104 Score of starting a business (0-100) 85.1 Score of getting credit (0-100) 80.0 Score of trading across borders (0-100) 70.8 Procedures (number) 8 Strength of legal rights index (0-12) 8 Time to export Time (days) 16 Depth of credit information index (0-8) 8 Documentary compliance (hours) 50 Cost (number) 5.6 Credit registry coverage (% of adults) 59.4 Border compliance (hours) 55 Paid-in min. capital (% of income per capita) 0.0 Credit bureau coverage (% of adults) 20.6 Cost to export Documentary compliance (USD) 139 Dealing with Construction Permits (rank) 25 Protecting Minority Investors (rank) 97 Border compliance (USD) 290 Score of dealing with construction permits (0-100) 79.3 Score of protecting minority investors (0-100) 54.0 Time to export Procedures (number) 10 Extent of disclosure index (0-10) 7.0 Documentary compliance (hours) 76 Time (days) 166 Extent of director liability index (0-10) 4.0 Border compliance (hours) 56 Cost (% of warehouse value) 0.5 Ease of shareholder suits index (0-10) 2.0 Cost to export Building quality control index (0-15) 12.0 Extent of shareholder rights index (0-6) 4.0 Documentary compliance (USD) 183 Extent of ownership and control index (0-7) 5.0 Border compliance (USD) 373 Getting Electricity (rank) 27 Extent of corporate transparency index (0-7) 5.0 Score of getting electricity (0-100) 88.2 Enforcing Contracts (rank) 68 Procedures (number) 4 Paying Taxes (rank) 109 Score of enforcing contracts (0-100) 62.1 Time (days) 31 Score of paying taxes (0-100) 69.0 Time (days) 400 Cost (% of income per capita) 994.2 Payments (number per year) 6 Cost (% of claim value) 29.0 Reliability of supply and transparency of tariff index (0-8) 7 Time (hours per year) 384 Quality of judicial processes index (0-18) 7.5 Total tax and contribution rate (% of profit) 37.6 Registering Property (rank) 64 Postfiling index (0-100) 49.1 Resolving Insolvency (rank) 122 Score of registering property (0-100) 71.1 Score of resolving insolvency (0-100) 38.0 Procedures (number) 5 Recovery rate (cents on the dollar) 21.3 Time (days) 53.5 Time (years) 5.0 Cost (% of property value) 0.6 Cost (% of estate) 14.5 Quality of the land administration index (0-30) 14.0 Outcome (0 as piecemeal sale and 1 as going 0 concern) Strength of insolvency framework index (0-16) 8.5 Page 4 Doing Business 2020 Vietnam Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate a company To make the data comparable across economies, several assumptions about the business and the (number) procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business city -Is a limited liability company (or its legal equivalent). If there is more than one type of limited • Postregistration (for example, social security registration, liability company in the economy, the limited liability form most common among domestic firms is company seal) chosen. Information on the most common form is obtained from incorporation lawyers or the statistical office. • Obtaining approval from spouse to start a business or to leave -Operates in the economy’s largest business city. For 11 economies the data are also collected for the home to register the company the second largest business city. • Obtaining any gender specific document for company -Performs general industrial or commercial activities such as the production or sale to the public of registration and operation or national identification card goods or services. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily Time required to complete each procedure (calendar days) polluting production processes. • Does not include time spent gathering information -Does not qualify for investment incentives or any special benefits. -Is 100% domestically owned. • Each procedure starts on a separate day (2 procedures cannot -Has five business owners, none of whom is a legal entity. One business owner holds 30% of the start on the same day) company shares, two owners have 20% of shares each, and two owners have 15% of shares • Procedures fully completed online are recorded as ½ day each. -Is managed by one local director. • Procedure is considered completed once final document is -Has between 10 and 50 employees one month after the commencement of operations, all of them received domestic nationals. • No prior contact with officials -Has start-up capital of 10 times income per capita. -Has an estimated turnover of at least 100 times income per capita. Cost required to complete each procedure (% of income per -Leases the commercial plant or offices and is not a proprietor of real estate. capita) -Has an annual lease for the office space equivalent to one income per capita. • Official costs only, no bribes -Is in an office space of approximately 929 square meters (10,000 square feet). -Has a company deed that is 10 pages long. • No professional fees unless services required by law or commonly used in practice The owners: Paid-in minimum capital (% of income per capita) -Have reached the legal age of majority and are capable of making decisions as an adult. If there • Funds deposited in a bank or with third party before registration is no legal age of majority, they are assumed to be 30 years old. or up to 3 months after incorporation -Are in good health and have no criminal record. -Are married, the marriage is monogamous and registered with the authorities. -Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Page 5 Doing Business 2020 Vietnam Starting a Business - Vietnam Standardized Company Legal form Cong ty trach nhiem huu han - Private Limited Liability Company Paid-in minimum capital requirement No minimum City Covered Ho Chi Minh City Indicator Vietnam East Asia & OECD high Best Regulatory Pacific income Performance Procedure – Men (number) 8 6.5 4.9 1 (2 Economies) Time – Men (days) 16 25.6 9.2 0.5 (New Zealand) Cost – Men (% of income per capita) 5.6 17.4 3.0 0.0 (2 Economies) Procedure – Women (number) 8 6.6 4.9 1 (2 Economies) Time – Women (days) 16 25.7 9.2 0.5 (New Zealand) Cost – Women (% of income per capita) 5.6 17.4 3.0 0.0 (2 Economies) Paid-in min. capital (% of income per capita) 0.0 3.5 7.6 0.0 (120 Economies) Figure – Starting a Business in Vietnam – Score 58.8 84.4 97.2 100.0 Procedures Time Cost Paid-in min. capital Figure – Starting a Business in Vietnam and comparator economies – Ranking and Score DB 2020 Starting a Business Score 0 100 92.4: Thailand (Rank: 47) 85.1: Vietnam (Rank: 115) 83.9: Regional Average (East Asia & Pacific) 83.3: Malaysia (Rank: 126) 81.2: Indonesia (Rank: 140) 62.7: Lao PDR (Rank: 181) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2020 Vietnam Figure – Starting a Business in Vietnam – Procedure, Time and Cost Time (days) Cost (% of income per capita) 16 4 14 3.5 Cost (% of income per capita) 12 3 Time (days) 10 2.5 8 2 6 1.5 4 1 2 0.5 0 0 1 2 3 4 5 *6 *7 *8 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2020 Vietnam Details – Starting a Business in Vietnam – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Check the proposed company name, obtain the certificates of business and tax registration 3 days VND 100,000 (registration, and publish the registration contents on the National Business Registration Portal (NBRP) free if online); VND Agency : Business Registration Office, Department of Planning & Investment 300,000 (publication) To register a company, the applicant must submit documents in accordance with Government Decree 78/2015/NĐ-CP on enterprise registration dated 14 September 2015, as amended by Decree 78/2015/ND-CP dated 23 August 2018. After receipt of the application documents which fully satisfies the conditions for issuance of an enterprise registration certificate, the Business Registration Office shall key the information stated in the application into the National Business Registration Portal ("NBRP") and check the application and supporting documents. The Business Registration Office shall issue the enterprise registration certificate within 3 working days from the receipt of satisfactory application documents. Within 5 working days after issuance of the enterprise registration certificate, the Business Registration Office shall send the enterprise registration contents to the tax authority department, the statistics department, the labor department and the social insurance department. It is possible to apply for registration online, however a follow-up with hard copies is required in that case. Furthermore, online applications may take longer in practice, especially in case there were any issues with documents. Therefore, majority of founders prefer to apply for registration in person. Business registrations are subject to VND 100,000 fee if applied for in person, or are free of charge if applied for online. The certificates of business and tax registration are either sent by post or collected at the Business Registration Office. At the moment of business registration, entrepreneurs also request the publication of the registration contents online. The fee to publish the registration contents on the National Business Registration Portal is VND 300,000 according to Circular No.106/2013/TT-BTC of the Ministry of Finance dated on 10 November 2016. 2 Make a company seal 1 day VND 450,000 Agency : Sealmaker Company seal is required by law and in practice to open a bank account. The company obtains a company seal from a seal-maker. The company has the right to decide on the design, content and quantity of its seal and can have several seals with the same design and content. 3 Submit an online notification of the seal-sample 1 day no charge Agency : Business Registration Office Entrepreneurs must submit an online notification of the seal-sample to the Business Registration Office. At the time of receiving the notification, the BRO sends the entrepreneur a receipt. According to Article 34 of Decree 78/2015/ND-CP, a company has the right to decide the effective date of the seal. 4 Open a bank account 1 day no charge Agency : Bank Each bank requires a different minimum deposit to open an account. For instance, whereas Vietcombank requires the fixed amount of VND 1 million for an account in VND and USD 300 for one in USD, Asian Commercial Bank requires VND 1 million for a VND account and US 100 for a USD account. To open the account, the bank requires a bank-issued application form, a copy of the notification on use of the seal with a confirmation stamp of the Business Registration Office, the Charter of the Company, the Enterprise Registration Certificate (ERC) and relevant documents as required by each bank. Bank account is required in practice to pay taxes. 5 Approve pre-printed VAT invoices with the Municipal Taxation Department 10 days about VND 200,000 per Agency : Municipal Taxation Department book Companies shall use self-printed or purchased VAT invoices or electronic VAT invoices. Electronic VAT regulation is not mandatory, and majority of companies opt for traditional VAT system. The applicant must contact a publisher to order the printing of VAT Invoice Books and must register the self-printed invoices with the Municipal Taxation Department. To register for self-printing of invoices, company founders must submit an application on a standard form, along with (a) a sample self-printed invoice, including all statutory details; (b) a map showing the location of the company’s office or copy of the lease contract if the premises are leased, certified by the ward commune people’s committee; (c) the general director’s identification card; (d) a copy of the business registration certificate; and (e) and the tax registration certificate and copy. In total, it takes about 10 days to obtain the self-printed VAT invoices and have them registered with the Municipal Taxation Department. Page 8 Doing Business 2020 Vietnam 6 Pay business license tax less than a day (online VND 2,000,000 (business Agency : Tax office or commercial bank procedure), license tax) The business license tax must be paid to the tax authority where the enterprise registers its tax simultaneous with reports or through designated commercial banks. This license tax is paid annually and in the first previous procedure month of a year (with regards to enterprises are operating) and in the month when the newly established enterprise obtains the tax code. A new company established during the first 6 months of the year shall pay the entire annual business license tax. If it was established during the last 6 months, it must pay 50% of the annual license tax. According to Article 4 of Circular 302/2016/TT-BTC, the business license tax depends on the charter capital of the enterprise as follows: - An enterprise with charter capital above VND 10 billion: VND 3,000,000 per year; - An enterprise with charter capital of VND 10 billion or less: VND 2,000,000 per year; - Branches, representative offices, business locations, business units, other economic organizations: VND 1,000,000 per year. The entrepreneur can transfer the licensing tax through commercial bank with form C1-02/NS enclosed to Circular 302/2016/TT-BTC 7 Register with the local labor office to declare use of labor 1 day, simultaneous with no charge Agency : Municipal Department for Labor, Invalids and Social Affairs previous procedure Within 30 days of starting operations, employers must register all employees and their qualifications with the Labor Office (in conformity with set forms). The relationship between the employer and its employees is regulated by the Labor Code and set forth in labor contracts. 8 Register employees with the Social Insurance Fund for the payment of health insurance 1 day, simultaneous with no charge and social insurance previous procedure Agency : Social Insurance Fund The company must register employees with the Social Insurance Fund. The employer must complete a form provided by the Social Insurance Fund and include the following information: the employee name and date of birth, salary (as stated in the labor contract), the social insurance book serial number (for employees already issued with those books), a certified copy of the company's business registration certificate, and a copy of each labor contract. The Social Insurance Office must, within 30 days from the date of receipt of the application file, issue an insurance registration book for each new employee that was not issued such book by the previous employer. The employer is responsible for paying social and health insurance contributions for each employee. Since the health insurance merged with the social insurance funds, payment is made (monthly or quarterly) directly to the Social Insurance Fund. Health insurance certificates are issued during the first month of the year. Takes place simultaneously with previous procedure. Page 9 Doing Business 2020 Vietnam Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse (number) To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates The construction company (BuildCo): • Submitting all required notifications and receiving all necessary - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest inspections business city. For 11 economies the data are also collected for the second largest business city. • Obtaining utility connections for water and sewerage - Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has a licensed architect and a licensed engineer, both registered with the local association of architects • Registering and selling the warehouse after its completion or engineers. BuildCo is not assumed to have any other employees who are technical or licensed Time required to complete each procedure (calendar days) experts, such as geological or topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse upon its • Does not include time spent gathering information completion. • Each procedure starts on a separate day—though procedures The warehouse: that can be fully completed online are an exception to this rule - Will be used for general storage activities, such as storage of books or stationery. • Procedure is considered completed once final document is received - Will have two stories, both above ground, with a total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will be • No prior contact with officials located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita. Cost required to complete each procedure (% of income per - Will have complete architectural and technical plans prepared by a licensed architect. If capita) preparation of the plans requires such steps as obtaining further documentation or getting prior • Official costs only, no bribes approvals from external agencies, these are counted as procedures. - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory Building quality control index (0-15) requirements). • Quality of building regulations (0-2) The water and sewerage connections: • Quality control before construction (0-1) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no water • Quality control during construction (0-3) delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage infrastructure, a septic tank in the smallest size available will be installed or built. • Quality control after construction (0-3) - Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flow • Liability and insurance regimes (0-2) of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and • Professional certifications (0-4) a peak wastewater flow of 1,136 liters (300 gallons) a day. - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 10 Doing Business 2020 Vietnam Dealing with Construction Permits - Vietnam Standardized Warehouse Estimated value of warehouse VND 2,735,849,545.60 City Covered Ho Chi Minh City Indicator Vietnam East Asia & OECD high Best Regulatory Pacific income Performance Procedures (number) 10 14.8 12.7 None in 2018/19 Time (days) 166 132.3 152.3 None in 2018/19 Cost (% of warehouse value) 0.5 3.2 1.5 None in 2018/19 Building quality control index (0-15) 12.0 9.4 11.6 15.0 (6 Economies) Figure – Dealing with Construction Permits in Vietnam – Score 80.0 59.7 97.4 80.0 Procedures Time Cost Building quality control index Figure – Dealing with Construction Permits in Vietnam and comparator economies – Ranking and Score DB 2020 Dealing with Construction Permits Score 0 100 89.9: Malaysia (Rank: 2) 79.3: Vietnam (Rank: 25) 77.3: Thailand (Rank: 34) 70.0: Regional Average (East Asia & Pacific) 68.3: Lao PDR (Rank: 99) 66.8: Indonesia (Rank: 110) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Page 11 Doing Business 2020 Vietnam Figure – Dealing with Construction Permits in Vietnam – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 0.4 160 0.35 140 Cost (% of warehouse value) 0.3 120 Time (days) 0.25 100 80 0.2 60 0.15 40 0.1 20 0.05 0 0 1 2 3 4 5 6 7 8 9 10 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 12 Doing Business 2020 Vietnam Figure – Dealing with Construction Permits in Vietnam and comparator economies – Measure of Quality 16 13.8 14 13.0 12.0 11.0 Index score 12 10 9.4 8 6.5 6 4 2 0 Vietnam Indonesia Lao Malaysia Thailand East PDR Asia & Pacific Details – Dealing with Construction Permits in Vietnam – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain the certification of the designs from the Police Department for Fire Fighting and Fire 30 days VND 242,943 Prevention of Ho Chi Minh City Agency : Police Department for Fire Fighting and Fire Prevention of Ho Chi Minh City According to Decree 79/2014/ND-CP dated 31 July 2014 of the Government and Decree No. 46/2012/ND-CP dated 05/22/2012 of the Government on amending and supplementing some provisions of the government's Decree 79/2014/ND-CP dated 31 July 2014 implementing certain articles of the Law on Fire Prevention and Fire Fighting and the Government's Decree No. 130/2006/ND-CP dated 08/11/2006 on the compulsory fire and explosion insurance regime, all new commercial buildings must obtain a certification of their designs by the Police Department for Fire Fighting and Fire Prevention. The certification is required for the construction permit application. 258/2016/TT-BTC dated 10/3/2016 on rates, collection, payment, management and use of fees for appraisal of fire safety designs the applicable fee for this procedure is as follows: 0.00888%*warehouse value. 2 Request and obtain construction permit from the (District) Department of Construction of 82 days VND 150,000 Ho Chi Minh City Agency : District-level People's Committee The decision to grant a construction permit is made by the District People's Committee, at the provincial level, and the Construction Office. The following documents are required: a) Application for issuance of building permit (standard form) b) Notarized or certified copy of one of the papers on the land use right in accordance with the Law on Land. Land is national property in Vietnam. Only a business can be the holder of the land- use right. It is assumed that the BuildCo already holds the land-use certificate. c) Two sets of design drawings, each of which includes: - Drawing of the works position on the land lot with a scale of 1/100 - 1/500, together with the outline of works position; - Drawing of surface, main elevation and section of the works with a scale of 1/50 - 1/200; - Drawing of foundation with a scale of 1/100 - 1/200 and foundation section of 1/50, together with the connection diagram to the system of transportation infrastructure, water supply, wastewater and rainwater drainage, wastewater treatment, electricity supply, communications and other technical infrastructure related to the project with a scale of 1/50 - 1/200. d) Environmental protection commitment or environmental protection plan e) Fire protection plan approved by relevant authorities If deemed necessary, the Construction Office consults any of the following related offices: • Office of the Chief Architect • Office for Land Planning • Office for Land Management • Department of Culture • Department of Health • Department of Natural Resources and Environment • Fire Protection Office • Department of Public Traffic and Transportation • Local National Defense Office Under Law on Construction No. 50/2014/QH13 of the Government dated 18 June 2014, The Department of Construction has 30 working days from the date of receiving the completed file to issue or deny the construction permit. In practice, this time limit is seldom met. The application form can be obtained at the local department of construction. It is currently required for a construction company to go to the office and obtain the form. After obtaining a construction permit, within a time limit of 7 working days prior to the date of commencement of construction of the warehouse, BuildCo is required to provide written notification of the commencement date to the People's Committee at the district level where the warehouse is located (according to Article 106.2.c of the Law on Construction No. 50/2014/QH13, dated 18 June 2014). Page 13 Doing Business 2020 Vietnam 3 Notify the Department of Construction about the commencement of construction and 1 day no charge receive inspection Agency : District-level People's Committee According to Construction Law, Article 106.2., a construction company is required to provide written notification of the commencement date to the People's Committee at the commune level where the warehouse is located within 7 working days prior to the date of commencement of construction of the warehouse. 4 Request and receive inspection from the municipality after completion of foundation works 3 days no charge Agency : District-level People's Committee Pursuant to Article 32.4b of Decree 46/2015/ND-CP, the municipality must inspect the project after the completion of foundation works. The competent authority will then issue the Inspection Minutes for acceptance within 7 days as from the completion of the inspection. 5 Request and receive inspection from the municipality upon completion of building 3 days no charge surroundings Agency : District-level People's Committee Pursuant to Article 32.4b of Decree 46/2015/ND-CP, the municipality must inspect the project after building surrounding works. The competent authority will then issue the Inspection Minutes for acceptance within 7 days from the completion of the inspection. 6 Request water and sewage connection 1 day VND 4,000,000 Agency : Ho Chi Minh City Water Supply Company Different areas in Ho Chi Minh City are covered by different public water companies. Therefore, BuildCo is required to contact the relevant water company and submit the following documents: • The application form (available at the water company) • A notarized copy of the business registration certificate of BuildCo • A certified copy of the land use right certificate or the construction permit The costs of obtaining water/sewage connection depend on the usage capacity of the warehouse, as well as on its exact location in relation to the main water lines. The standard water meters cost approximately VND 1.5 million. 7 Receive inspection by water company 1 day no charge Agency : Ho Chi Minh City Water Supply Company 8 Connect to water and sewage services 14 days no charge Agency : Ho Chi Minh City Water Supply Company 9 Notify and receive inspection from the municipality after completion of building 1 day no charge Agency : District-level People's Committee At the end of construction, the Department of Construction visits the site to confirm that the building was built according to the master plans, rules, and regulations. BuildCo must provide written notification of the completion of construction. 10 Obtain Certification of Environmental Protection Plans 30 days VND 9,600,000 Agency : Department of National Resources and Environment According to Decision 52/2016/QD-UBND dated 10/12/2016 and Article 7 Decree 140/2016/ ND- CP dated 10/10/2016, Article 4 Circular 301/2016/TT-BTC dated 15/4/2016, the cost for registering ownership of the warehouse should include an administrative fee of VND 500,000.00 and a registration fee of 0.5% of the warehouse value. For the registration fee, the value of the construction contract signed between BuildCo and the construction contractor will be taken as the warehouse value, provided that it is higher than the minimum value calculated by the Tax Department based on the minimum unit price as provided for by the People’s Committee of Ho Chi Minh City. The application file should be submitted to the Department of Natural Resources and Environment of Ho Chi Minh City.According to Article 61 of Decree 43/2014/ND-CP (dated 15 May 2014), providing details on the Law on Land, the time for issuance of the certificate of ownership of construction work shall not exceed 30 days. The work carried out by the Department of Construction includes the time for taking measurements or checking the measurements of the construction works, if any; reviewing the application file; submitting the file for approval and signature; and notifying the applicant to make payment of financial obligations (e.g., payment of the registration fee at Tax Department). Decree 88 also states that the applicant must pay all financial obligations within 60 working days from the date of receipt of the notification from the Department of Construction. Takes place simultaneously with previous procedure. Page 14 Doing Business 2020 Vietnam Details – Dealing with Construction Permits in Vietnam – Measure of Quality Answer Score Building quality control index (0-15) 12.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; Free 1.0 of charge. Which requirements for obtaining a building permit are clearly specified in the building regulations or on any List of required 1.0 accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in compliance with existing Licensed architect; 1.0 building regulations? (0-1) Licensed engineer. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during construction? (0-2) Inspections by in- 1.0 house engineer; Unscheduled inspections. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice. Quality control after construction index (0-3) 3.0 Is there a final inspection required by law to verify that the building was built in accordance with the approved Yes, final inspection 2.0 plans and regulations? (0-2) is done by government agency; Yes, in-house engineer submits report for final inspection. Do legally mandated final inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 0.0 Which parties (if any) are held liable by law for structural flaws or problems in the building once it is in use No party is held liable 0.0 (Latent Defect Liability or Decennial Liability)? (0-1) under the law. Which parties (if any) are required by law to obtain an insurance policy to cover possible structural flaws or No party is required 0.0 problems in the building once it is in use (Latent Defect Liability Insurance or Decennial Insurance)? (0-1) by law to obtain insurance . Professional certifications index (0-4) 4.0 What are the qualification requirements for the professional responsible for verifying that the architectural plans Minimum number of 2.0 or drawings are in compliance with existing building regulations? (0-2) years of experience; University degree in architecture or engineering; Being a registered architect or engineer; Passing a certification exam. What are the qualification requirements for the professional who supervises the construction on the ground? (0- Minimum number of 2.0 2) years of experience; University degree in engineering, construction or construction management; Being a registered architect or engineer; Passing a certification exam. Page 15 Doing Business 2020 Vietnam Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection (number) To make the data comparable across economies, several assumptions about the warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining all necessary clearances and permits The warehouse: • Completing all required notifications and receiving all necessary - Is owned by a local entrepreneur and is used for storage of goods. inspections - Is located in the economy’s largest business city. For 11 economies the data are also collected for • Obtaining external installation works and possibly purchasing the second largest business city. material for these works - Is located in an area where similar warehouses are typically located and is in an area with no physical constraints. For example, the property is not near a railway. • Concluding any necessary supply contract and obtaining final - Is a new construction and is being connected to electricity for the first time. supply - Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square Time required to complete each procedure (calendar days) feet). The plot of land on which it is built is 929 square meters (10,000 square feet). • Is at least 1 calendar day The electricity connection: • Each procedure starts on a separate day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140- • Does not include time spent gathering information kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW). - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution • Reflects the time spent in practice, with little follow-up and no network and is either overhead or underground, whichever is more common in the area where the prior contact with officials warehouse is located and requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other Cost required to complete each procedure (% of income per owners’ private property because the warehouse has access to a road. capita) - Does not require work to install the internal wiring of the warehouse. This has already been • Official costs only, no bribes completed up to and including the customer’s service panel or switchboard and the meter base. • Value added tax excluded The monthly consumption: The reliability of supply and transparency of tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 p.m. (8 hours • Duration and frequency of power outages (0–3) a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours • Tools to monitor power outages (0–1) (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier. - Tariffs effective in January of the current year are used for calculation of the price of electricity for • Regulatory monitoring of utilities’ performance (0–1) the warehouse. Although January has 31 days, for calculation purposes only 30 days are used. • Financial deterrents limiting outages (0–1) • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor in the ranking on the ease of getting electricity. Page 16 Doing Business 2020 Vietnam Getting Electricity - Vietnam Standardized Connection Name of utility EVNHCMC Price of electricity (US cents per kWh) 12.5 City Covered Ho Chi Minh City Indicator Vietnam East Asia & OECD high Best Regulatory Pacific income Performance Procedures (number) 4 4.2 4.4 3 (28 Economies) Time (days) 31 63.2 74.8 18 (3 Economies) Cost (% of income per capita) 994.2 594.6 61.0 0.0 (3 Economies) Reliability of supply and transparency of tariff index (0-8) 7 4.0 7.4 8 (26 Economies) Figure – Getting Electricity in Vietnam – Score 83.3 94.3 87.7 87.5 Reliability of supply and transparency of Procedures Time Cost tariff index Figure – Getting Electricity in Vietnam and comparator economies – Ranking and Score DB 2020 Getting Electricity Score 0 100 99.3: Malaysia (Rank: 4) 98.7: Thailand (Rank: 6) 88.2: Vietnam (Rank: 27) 87.3: Indonesia (Rank: 33) 75.1: Regional Average (East Asia & Pacific) 58.0: Lao PDR (Rank: 144) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Figure – Getting Electricity in Vietnam – Procedure, Time and Cost Time (days) Cost (% of income per capita) 1200 30 Cost (% of income per capita) 1000 25 800 20 Time (days) 15 600 10 400 5 200 0 0 1 *2 3 4 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures Page 17 Doing Business 2020 Vietnam reflected here, see the summary below. Figure – Getting Electricity in Vietnam and comparator economies – Measure of Quality 9 8 8 8 7 7 Index score 6 6 5 4.0 4 3 3 2 1 0 Vietnam Indonesia Lao Malaysia Thailand East PDR Asia & Pacific Page 18 Doing Business 2020 Vietnam Details – Getting Electricity in Vietnam – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Submit application to EVN HCMC and await clearance 4 calendar days VND 0 Agency : EVNHCMC The request for a new electrical connection can be made in the following manners: (1) directly at the utility, (2) online, through the utility's website, (3) through its Customer Care Center, (4) via other legal manners. Once received, the request is transferred to the utility's Exchange Team, according to the "one door" mechanism, to process and approve applications. List of documents/information sent to Distribution Department (information of customer is filed in the supplied forms): + Information of customer: name, power supply location, power use schedule, registered capacity, estimated load profile. + Arrangement layout. + Characteristics of technology chain, load components of customer directly recognized from power distribution grid. Document copies are not requested to be notarized, accordingly, the utility compares copies and originals and returns the originals to the customer immediately. 2 Obtain external inspection by EVN HCMC 1 calendar day VND 0 Agency : EVNHCMC After the utility has received the application, it inspects the site to determine the specifics of the connection. No estimate of connection fees is prepared. However, the client needs to await approval (clearance) of EVNHCMC on the requested power. The customer (or his/her contractor) will typically be present during the site visit of EVNHCMC. 3 Hire private firm to design and carry out external works 20 calendar days VND 544,000,000 Agency : Electrical Contractor The customer can either ask the Distribution Department of EVN HCMC to do the works for them or hire a private firm. The more common approach is to hire an outside firm. If more than 100 kVA is needed, a substation must be built. In the case where the customer chooses to hire an outside agency to carry out the works, the electricity company must first approve the designs. A contract is signed after both parties have agreed on the capacity, construction schedule, construction border, etc. There is no inspection of the entire internal wiring, and any electrician can carry out the internal installation. To ensure liability, the customer usually hires a licensed electrical construction company. 4 Obtain meter installation and final connection from EVN HCMC 7 calendar days VND 0 Agency : EVNHCMC After the external works have been completed, the Distribution Department of the utility comes to install the meter. The client together with the contractor must be present during meter installation. Takes place simultaneously with previous procedure. Page 19 Doing Business 2020 Vietnam Details – Getting Electricity in Vietnam – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 7 Total duration and frequency of outages per customer a year (0-3) 2 System average interruption duration index (SAIDI) 2.1 System average interruption frequency index (SAIFI) 1.6 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 5.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of supply? Yes Financial deterrents aimed at limiting outages (0-1) 1 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages exceed a certain cap? Yes Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online https://cskh.hcmpc.com.v n/tracuu/giabandien Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 20 Doing Business 2020 Vietnam Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on immovable property To make the data comparable across economies, several assumptions about the parties to the (number) transaction, the property and the procedures are used. • Preregistration procedures (for example, checking for liens, The parties (buyer and seller): notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). • Registration procedures in the economy's largest business city. - Are located in the periurban (that is, on the outskirts of the city but still within its official limits) • Postregistration procedures (for example, filling title with area of the economy’s largest business city. For 11 economies the data are also collected for the municipality) second largest business city. - Are 100% domestically and privately owned. Time required to complete each procedure (calendar days) - Perform general commercial activities. • Does not include time spent gathering information The property (fully owned by the seller): • Each procedure starts on a separate day - though procedures - Has a value of 50 times income per capita, which equals the sale price. that can be fully completed online are an exception to this rule - Is fully owned by the seller. • Procedure is considered completed once final document is - Has no mortgages attached and has been under the same ownership for the past 10 years. received - Is registered in the land registry or cadastre, or both, and is free of title disputes. • No prior contact with officials - Is located in a periurban commercial zone (that is, on the outskirts of the city but still within its official limits), and no rezoning is required. Cost required to complete each procedure (% of property - Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two- value) story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, • Official costs only (such as administrative fees, duties and building codes and legal requirements. The property, consisting of land and building, will be taxes). transferred in its entirety. • Value Added Tax, Capital Gains Tax and illicit payments are - Will not be subject to renovations or additional construction following the purchase. excluded - Has no trees, natural water sources, natural reserves or historical monuments of any kind. - Will not be used for special purposes, and no special permits, such as for residential use, Quality of land administration index (0-30) industrial plants, waste storage or certain types of agricultural activities, are required. - Has no occupants, and no other party holds a legal interest in it. • Reliability of infrastructure index (0-8) • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 21 Doing Business 2020 Vietnam Registering Property - Vietnam Indicator Vietnam East Asia & OECD high Best Regulatory Pacific income Performance Procedures (number) 5 5.5 4.7 1 (5 Economies) Time (days) 53.5 71.9 23.6 1 (2 Economies) Cost (% of property value) 0.6 4.5 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 14.0 16.2 23.2 None in 2018/19 Figure – Registering Property in Vietnam – Score 66.7 74.9 96.2 46.7 Procedures Time Cost Quality of the land administration index Figure – Registering Property in Vietnam and comparator economies – Ranking and Score DB 2020 Registering Property Score 0 100 79.5: Malaysia (Rank: 33) 71.1: Vietnam (Rank: 64) 69.5: Thailand (Rank: 67) 64.9: Lao PDR (Rank: 88) 60.0: Indonesia (Rank: 106) 57.5: Regional Average (East Asia & Pacific) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Page 22 Doing Business 2020 Vietnam Figure – Registering Property in Vietnam – Procedure, Time and Cost Time (days) Cost (% of property value) 0.6 50 0.5 Cost (% of property value) 40 0.4 Time (days) 30 0.3 20 0.2 10 0.1 0 0 1 2 3 4 5 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 23 Doing Business 2020 Vietnam Figure – Registering Property in Vietnam and comparator economies – Measure of Quality 30 26.5 25 Index score 20 19.0 15.5 16.2 15 14.0 10.5 10 5 0 Vietnam Indonesia Lao Malaysia Thailand East PDR Asia & Pacific Details – Registering Property in Vietnam – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Make an application for the transfer of land use rights and ownership of assets attached to 1 day VND 4,000 the land Agency : Land Registration Office under the Department of Natural Resources and Environment (LRO) Parties obtain a Land Use Right Certificate (LURC) transfer contract (standard form) for free at the notary's office or online at http://moj.gov.vn/huongdannv/Lists/TaiLieuNghiepVu/View_Detail.aspx? ItemId=138. At the LRO, the buyer will search for the ownership information. The dossier includes: (i) LURC, (ii) decision or resolution of the highest decision-making body of the company regarding the LUR transfer, and (iii) company's legal status documents and the construction works. 2 Notary checks for any encumbrances on the property Less than one day, no charge Agency : Notary Public online Under Article 46 of the Law on Notarization, the notary public is required to check the contents of the transfer agreement and if it does not contradict social ethics or violate laws and regulations. In practice, the notary public will also verify the encumbrances on the property with the LRO before notarizing the transfer contract. If the property is subject to an encumbrance, the notary public will not conduct the notarization unless otherwise agreed by the existing mortgagee (or any other owner of the burden) and the transferee. Under Article 62 of the Law on Notarization, the Department of Justice and LRO have a system for the notaries to check the encumbrance on the transferred property before notarizing the contract. There is no cost arising from such searches. The system is not accessible to the public. 3 The buyer and seller sign the contract which will be witnessed and certified by a notary 3 days VND 2,041,509.73; (VND located in the same area as the property. 1 million + 0.06% of the Agency : Notary Public amount exceeding VND 1 The property transfer contract shall be made in duplicate, one for the seller and another for the billion) buyer. The public notary must notarize the property transfer contract (according to Article 167.3 of Land Law No. 45/2013/QH13 of the National Assembly dated November 29, 2013, which became effective from July 1, 2014 (the "New Land Law")). The dossier submitted to the public notary office includes: (i) request for notarization of the contract (in standard form); (ii) property transfer contract; (iii) documents evidencing the transferor’s title to the land and warehouse (e.g. land use right certificate for the 557.4 square meters land and construction works ownership certificate for the warehouse or the certificate of land use right and assets attached to the land for both the land and the warehouse); (iv) business registration certificate of the transferor and the transferee; (v) copies of other documents relevant to the property transfer contract (Article 40.1 of the Law on Notarization). The time-limit for notarization shall not exceed two working days. In the case of a complicated contract or transaction, this time-limit may not extend ten working days (Article 43.2 of the Law on Notarization). If the value of property or the value of contract is from VND 1,000,000,000 and VND 3,000,000,000, the notary fee is VND 1,000,000 +0.06% of the value of property or the value of contract exceeding VND 1,000,000,000. Circular No. 257/2016/TT-BTC dated November 11, 2016 of the Ministry of Finance, amended by Circular No. 111/2017/TT-BTC dated October 20, 2017 of the Ministry of Finance, prescribes regulations on notarial and authentication service fees, fees for verification of eligibility for practicing as a notary, fees for verification of eligibility for operating private notary office, charges for processing of applications for notary card, and the collection, transfer, management and use thereof. Page 24 Doing Business 2020 Vietnam 4 The parties pay income tax on the assignment of the land-use right and the registration fee 28 days VND 13,679,247.73; (0,5% at the relevant District Department of Taxation of property value) Agency : District Department of Taxation The registration fee (paid by the transferee) is 0.5% of the property value (Article 7.1 of Decree No. 140/2016/ND-CP dated October 10, 2016, amended by Decree No. 20/2019/ND-CP dated February 21, 2019, of the Government on registration fee, and Article 4.1 of Circular No. 301/2016/TT-BTC of the Ministry of Finance dated November 15, 2016, guiding on registration fee). From January 1, 2016, the tax rate of the income tax from the assignment of land use right (paid by the transferor) is 20% (Article 10.1 and Article 3.2 of Law on Corporate Income Tax No. 14/2008/QH12 dated June 3, 2008, as amended by Law No. 32/2013/QH13 dated June 19, 2013 and Law No. 71/2014/QH13 dated November 26, 2014 (the "CIT Law")). The declaration and payment of CIT must be done no later than ten days from the date of arising of tax obligation (Articles 10.3(d) and 26.2 of Circular No. 156/2013/TT-BTC dated November 6, 2013). The transfer of land use right is not subject to value-added tax but a transfer of the warehouse is subject to value-added tax rate of 10% (Articles 5.6 and 8.3 of Law on Value Added Tax No. 13/2008/QH12 dated June 3, 2008, as amended by Law No. 31/2013/QH13 dated June 19, 2013, Law No. 71/2014/QH13 dated November 26, 2014, and Law No. 106/2016/QH13 dated April 6, 2016). 5 The land-use right transferee shall register the right to use land 21 days VND 50,000; (VND 50,000 Agency : Land Registration Office under the Department of Natural Resources and Environment (Update existing LUR (LRO) Certificate) The LRO is the prescribed authority. Currently, there are many LRO in Ho Chi Minh City, including the provincial LRO (under the Department of Nature Resources and Environment of Ho Chi Minh According to Decision No. City) and district LRO (under the people’s committee of districts). According to Article 17.1(a) and (k) of Circular No. 23/2014/TT-BTNMT of the MONRE providing for land use right or house and 52/2016/QD-UBND of the land-attached asset ownership certificates (effective as of July 5, 2014), in order to obtain the People's Committee of Ho LURC, the transferee may request the LRO to issue a new LURC or an update on the existing Chi Minh City dated LURC. December 10, 2016, the fee applicable to an 1. Issuance of a new LURC organization having a land Dossier: According to Art. 8.1 of Circular No. 24/2014/TT-BTNMT, as amended by Circular No. use right and assets 02/2015/TT-BTNMT dated January 27, 2015 and Circular No. 33/2017/TT-BTNMT dated attached to land with an September 19, 2017, of the MONRE providing for cadastral records ("Circular 24"), the application area from 500 sqm to dossier for the issuance of new LURC includes (i) application for issuance of LURC (in a stipulated form); (ii) one of the documents prescribed in Art. 100 of the New Land Law and Article 1,000 sqm is the following: 18 of Decree 43; (iii) one of the documents specified in Articles 31, 32, 33, 34 of Decree 43 (i.e. (a) VND 350,000 for the property ownership certification, etc.); (iv) copies of documents evidencing for fulfillment of issuance of a new LURC; relevant financial obligation; and (v) a map describing the property. or (b) VND 50,000 for the Timeline: 30 days from the day of receipt of the proper dossier (Article 61.2(a) of Decree 43) update/amendment to the existing LURC.) 2. Update on the existing LURC Dossier: According to Article 7.2 of Circular 33/2017/TT-BTNMT, the application dossier for the update on existing LURC includes: (i) application (in a stipulated form); (ii) the property transfer contract; and (iii) the original LURC and the certificate of ownership of the warehouse. Timeline: 10 days from the date of receipt of the proper dossier (Article 61.2.(i) of Decree 43). However, practitioners confirmed that obtaining the updated version of the existent LURC could take up to 21 days. Takes place simultaneously with previous procedure. Page 25 Doing Business 2020 Vietnam Details – Registering Property in Vietnam – Measure of Quality Answer Score Quality of the land administration index (0-30) 14.0 Reliability of infrastructure index (0-8) 6.0 Type of land registration system in the economy: Title Registration System What is the institution in charge of immovable property registration? Land Registration Office under the Department of Natural Resources and Environment In what format are past and newly issued land records kept at the immovable property registry of the largest Computer/Scanned 1.0 business city of the economy —in a paper format or in a computerized format (scanned or fully digital)? Is there a comprehensive and functional electronic database for checking for encumbrances (liens, mortgages, Yes 1.0 restrictions and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Department of Survey and Map under the Department of Natural Resources and Environment In what format are past and newly issued cadastral plans kept at the mapping agency of the largest business Computer/Scanned 1.0 city of the economy—in a paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral information Yes 1.0 (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral or mapping agency Different databases 1.0 kept in a single database, in different but linked databases or in separate databases? but linked Do the immovable property registration agency and cadastral or mapping agency use the same identification Yes 1.0 number for properties? Transparency of information index (0–6) 3.0 Who is able to obtain information on land ownership at the agency in charge of immovable property registration Anyone who pays the 1.0 in the largest business city? official fee Is the list of documents that are required to complete any type of property transaction made publicly available– Yes, online 0.5 and if so, how? Link for online access: http://congchung.gov. vn/ho-so-cong- chung/HD-chuyen- nhuong-dat.html Is the applicable fee schedule for any type of property transaction at the agency in charge of immovable Yes, online 0.5 property registration in the largest business city made publicly available–and if so, how? Link for online access: http://congchung.gov. vn/blog/detail/18- Bieu-phi-cong- chung.html http://www.congbao.h ochiminhcity.gov.vn/c ong-bao/van- ban/quyet-dinh/so/52- 2016-qd- ubnd/ngay/10-12- 2016/noi- dung/42191/42228 Does the agency in charge of immovable property registration agency formally commit to deliver a legally Yes, online 0.5 binding document that proves property ownership within a specific timeframe –and if so, how does it communicate the service standard? Page 26 Doing Business 2020 Vietnam Link for online access: http://csdl.thutuchanh chinh.vn/TW/Pages/c hi-tiet-thu-tuc-hanh- chinh.aspx? ItemID=496820&tthc DonVi=B%E1%BB%9 9+T%C3%A0i+nguy %C3%AAn+v%C3% A0+M%C3%B4i+tr% C6%B0%E1%BB%9 Dng http://csdl.thutuchanh chinh.vn/tw/Pages/chi -tiet-thu-tuc-hanh- chinh.aspx? ItemID=489766&tthcL inhVuc=10938&tthcD onVi=B%E1%BB%99 %20T%C3%A0i%20n guy%C3%AAn%20v %C3%A0%20M%C3 %B4i%20tr%C6%B0 %E1%BB%9Dng Is there a specific and independent mechanism for filing complaints about a problem that occurred at the agency No 0.0 in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the immovable property No 0.0 registration agency? Number of property transfers in the largest business city in 2018: Who is able to consult maps of land plots in the largest business city? Only intermediaries 0.0 and interested parties Is the applicable fee schedule for accessing maps of land plots made publicly available—and if so, how? Yes, on public boards 0.5 Link for online access: Does the cadastral/mapping agency formally specifies the timeframe to deliver an updated cadastral plan—and Yes, in person 0.0 if so, how does it communicate the service standard? Link for online access: Is there a specific and independent mechanism for filing complaints about a problem that occurred at the No 0.0 cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 0.0 Are all privately held land plots in the largest business city formally registered at the immovable property No 0.0 registry? Are all privately held land plots in the economy formally registered at the immovable property registry? No 0.0 Are all privately held land plots in the largest business city mapped? No 0.0 Are all privately held land plots in the economy mapped? No 0.0 Land dispute resolution index (0–8) 5.0 Does the law require that all property sale transactions be registered at the immovable property registry to make Yes 1.5 them opposable to third parties? Legal basis: Article 95 of the New Land Law of 2014; and article 168 of the Civil Code 2005 Is the system of immovable property registration subject to a state or private guarantee? Yes 0.5 Type of guarantee: State guarantee Page 27 Doing Business 2020 Vietnam Legal basis: Articles 26 of the New Land Law of 2014; and article 168 of the Civil Code 2005 Is there a is a specific, out-of-court compensation mechanism to cover for losses incurred by parties who No 0.0 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Legal basis: Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., Yes 0.5 checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar; Notary; Does the legal system require verification of the identity of the parties to a property transaction? Yes 0.5 If yes, who is responsible for verifying the identity of the parties? Registrar; Notary; Is there a national database to verify the accuracy of government issued identity documents? No 0.0 What is the Court of first instance in charge of a case involving a standard land dispute between two local District-level or businesses over tenure rights for a property worth 50 times gross national income (GNI) per capita and located Provincial-level in the largest business city? People's Court where the land locates (Civil Procedures Code 2015, Articles 35.1(a) and 37.1(a)) How long does it take on average to obtain a decision from the first-instance court for such a case (without Between 1 and 2 2.0 appeal)? years Are there publicly available statistics on the number of land disputes at the economy level in the first instance No 0.0 court? Number of land disputes in the economy in 2018: Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Do married men and married women have equal ownership rights to property? Yes 0.0 Page 28 Doing Business 2020 Vietnam Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit • Rights of borrowers and lenders through collateral laws (0-10) information index measures rules and practices affecting the coverage, scope and accessibility of • Protection of secured creditors’ rights through bankruptcy laws credit information available through a credit registry or a credit bureau. The strength of legal rights (0-2) index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary Depth of credit information index (0–8) secured transactions system exists. Then two case scenarios, case A and case B, are used to • Scope and accessibility of credit information distributed by determine how a nonpossessory security interest is created, publicized and enforced according to credit bureaus and credit registries (0-8) the law. Special emphasis is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest credit bureau In some economies the legal framework for secured transactions will allow only case A or case B as a percentage of adult population (not both) to apply. Both cases examine the same set of legal provisions relating to the use of movable collateral. Credit registry coverage (% of adults) • Number of individuals and firms listed in credit registry as a Several assumptions about the secured borrower (ABC) and lender (BizBank) are used: percentage of adult population - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 29 Doing Business 2020 Vietnam Getting Credit - Vietnam Indicator Vietnam East Asia & OECD high Best Regulatory Pacific income Performance Strength of legal rights index (0-12) 8 7.1 6.1 12 (5 Economies) Depth of credit information index (0-8) 8 4.5 6.8 8 (53 Economies) Credit registry coverage (% of adults) 59.4 16.6 24.4 100.0 (2 Economies) Credit bureau coverage (% of adults) 20.6 23.8 66.7 100.0 (14 Economies) Figure – Getting Credit in Vietnam – Score 80.0 Score - Getting Credit Figure – Getting Credit in Vietnam and comparator economies – Ranking and Score DB 2020 Getting Credit Score 0 100 80.0: Vietnam (Rank: 25) 75.0: Malaysia (Rank: 37) 70.0: Indonesia (Rank: 48) 70.0: Thailand (Rank: 48) 60.0: Lao PDR (Rank: 80) 58.0: Regional Average (East Asia & Pacific) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Page 30 Doing Business 2020 Vietnam Figure – Legal Rights in Vietnam and comparator economies 9 8 8 7 7 7.1 7 Index Score 6 6 6 5 4 3 2 1 0 Vietnam Indonesia Lao Malaysia Thailand East PDR Asia & Pacific Page 31 Doing Business 2020 Vietnam Details – Legal Rights in Vietnam Strength of legal rights index (0-12) 8 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents Yes to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description Yes of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of Yes collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and replacements of the Yes original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; Yes and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an Yes electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any interested third No party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency procedure? No Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? Yes Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell Yes the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Vietnam and comparator economies 9 8 8 8 8 7 7 Index Score 6 6 5 4.5 4 3 2 1 0 Vietnam Indonesia Lao Malaysia Thailand East PDR Asia & Pacific Page 32 Doing Business 2020 Vietnam Details – Credit Information in Vietnam Depth of credit information index (0-8) Credit bureau Credit registry Score Are data on both firms and individuals distributed? Yes Yes 1 Are both positive and negative credit data distributed? Yes Yes 1 Are data from retailers or utility companies - in addition to data from banks and No Yes 1 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries Yes Yes 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes Yes 1 By law, do borrowers have the right to access their data in the credit bureau or Yes No 1 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes Yes 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help Yes Yes 1 banks and financial institutions assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 13,692,000 38,458,572 Number of firms 3,670 1,015,474 Total 13,695,670 39,474,046 Percentage of adult population 20.6 59.4 Page 33 Doing Business 2020 Vietnam Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Disclosure, review, and To make the data comparable across economies, a case study uses several assumptions about approval requirements for related-party transactions the business and the transaction. • Extent of director liability index (0–10): Ability of minority shareholders to sue and hold interested directors liable for The business (Buyer): prejudicial related-party transactions; Available legal - Is a publicly traded corporation listed on the economy’s most important stock exchange. remedies (damages, disgorgement of profits, disqualification - Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of from managerial position(s) for one year or more, rescission of Buyer where permitted, even if this is not specifically required by law. the transaction) - Has a supervisory board in economies with a two-tier board system on which Mr. James appointed 60% of the shareholder-elected members. • Ease of shareholder suits index (0–10): Access to internal - Has not adopted bylaws or articles of association that go beyond the minimum requirements. corporate documents; Evidence obtainable during trial and allocation of legal expenses Does not follow codes, principles, recommendations or guidelines that are not mandatory. - Is a manufacturing company with its own distribution network. • Extent of conflict of interest regulation index (0-30): Sum of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder suits indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to • Extent of shareholder rights index (0-6): Shareholders’ rights Buyer’s five-member board. and role in major corporate decisions - Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-7): Governance - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s safeguards protecting shareholders from undue board control distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of and entrenchment Buyer’s assets and is higher than the market value. • Extent of corporate transparency index (0-7): Corporate - The proposed transaction is part of the company’s principal activity and is not outside the transparency on ownership stakes, compensation, audits and authority of the company. financial prospects - Buyer enters into the transaction. All required approvals are obtained, and all required disclosures made—that is, the transaction was not entered into fraudulently. • Extent of shareholder governance index (0–20): Sum of the - The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and extent of shareholders rights, extent of ownership and control directors that approved the transaction. and extent of corporate transparency indices • Strength of minority investor protection index (0–50): Sum of the extent of conflict of interest regulation and extent of shareholder governance indices Page 34 Doing Business 2020 Vietnam Protecting Minority Investors - Vietnam Stock exchange information Stock exchange Ho Chi Minh Stock Exchange Stock exchange URL https://www.hsx.vn Listed firms with equity securities 396 City Covered Ho Chi Minh City Indicator Vietnam East Asia & OECD high Best Regulatory Pacific income Performance Extent of disclosure index (0-10) 7.0 5.9 6.5 10 (13 Economies) Extent of director liability index (0-10) 4.0 5.2 5.3 10 (3 Economies) Ease of shareholder suits index (0-10) 2.0 6.7 7.3 10 (Djibouti) Extent of shareholder rights index (0-6) 4.0 2.0 4.7 6 (19 Economies) Extent of ownership and control index (0-7) 5.0 2.4 4.5 7 (9 Economies) Extent of corporate transparency index (0-7) 5.0 2.6 5.7 7 (13 Economies) Figure – Protecting Minority in Vietnam – Score 54.0 Score - Protecting Minority Investors Figure – Protecting Minority Investors in Vietnam and comparator economies – Ranking and Score DB 2020 Protecting Minority Investors Score 0 100 88.0: Malaysia (Rank: 2) 86.0: Thailand (Rank: 3) 70.0: Indonesia (Rank: 37) 54.0: Vietnam (Rank: 97) 49.7: Regional Average (East Asia & Pacific) 20.0: Lao PDR (Rank: 179) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Page 35 Doing Business 2020 Vietnam Figure – Protecting Minority Investors in Vietnam and comparator economies – Measure of Quality Vietnam 5 4 7 5 4 2 Indonesia 7 5 10 6 5 2 Lao PDR 01 6 0 3 Malaysia 6 9 10 6 5 8 Thailand 6 7 10 6 5 9 OECD high income 5.6 5.6 6.6 4.3 4.5 7.4 East Asia & Pacific 3.1 5.1 6.4 2.9 2.4 6.3 0 5 10 15 20 25 30 35 40 45 50 Sub-Indicator Score Extent of corporate transparency index (0-7) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-7) Extent of shareholder rights index (0-6) Ease of shareholder suits index (0-10) Page 36 Doing Business 2020 Vietnam Details – Protecting Minority Investors in Vietnam – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-30) Extent of disclosure index (0-10) 7.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Board of directors 2.0 excluding interested members Must an external body review the terms of the transaction before it takes place? (0-1) No 0.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) Full disclosure of all 2.0 material facts Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) Disclosure on the 2.0 transaction and on the conflict of interest Must Buyer immediately disclose the transaction to the public? (0-2) Disclosure on the 1.0 transaction only Extent of director liability index (0-10) 4.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to Yes 1.0 Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2) Liable if negligent 1.0 Can shareholders hold the other directors liable for the damage the transaction caused to Buyer? (0-2) Not liable 0.0 Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1) Yes 1.0 Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1) Yes 1.0 Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Only in case of fraud 0.0 or bad faith Ease of shareholder suits index (0-10) 2.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents? No 0.0 (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) No 0.0 Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1) No 0.0 Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Preapproved 1.0 questions only Is the level of proof required for civil suits lower than that of criminal cases? (0-1) No 0.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-20) Extent of shareholder rights index (0-6) 4.0 Does the sale of 51% of Buyer's assets require shareholder approval? Yes 1.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders? Yes 1.0 Must Buyer obtain its shareholders’ approval every time it issues new shares? No 0.0 Do shareholders automatically receive preemption rights every time Buyer issues new shares? Yes 1.0 Do shareholders elect and dismiss the external auditor? Yes 1.0 Are changes to the rights of a class of shares only possible if the holders of the affected shares approve? No 0.0 Extent of ownership and control index (0-7) 5.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors? No 0.0 Page 37 Doing Business 2020 Vietnam Must the board of directors include independent and nonexecutive board members? Yes 1.0 Can shareholders remove members of the board of directors without cause before the end of their term? Yes 1.0 Must the board of directors include a separate audit committee exclusively comprising board members? No 0.0 Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer? Yes 1.0 Must Buyer pay declared dividends within a maximum period set by law? Yes 1.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? Yes 1.0 Extent of corporate transparency index (0-7) 5.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? Yes 1.0 Must Buyer disclose information about board members’ primary employment and directorships in other Yes 1.0 companies? Must Buyer disclose the compensation of individual managers? Yes 1.0 Must a detailed notice of general meeting be sent 21 days before the meeting? No 0.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda? No 0.0 Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Page 38 Doing Business 2020 Vietnam Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in 2018 (number Using a case scenario, Doing Business records taxes and mandatory contributions a medium size per year adjusted for electronic and joint filing and payment) company must pay in a year, and measures the administrative burden of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of • Total number of taxes and contributions paid or withheld, filing and payments, time taken to comply with tax laws, time taken to comply with the including consumption taxes (value added tax, sales tax or requirements of postfiling processes and time waiting. goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces Time required to comply with 3 major taxes (hours per year) ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the second year of operation (calendar year 2018). Taxes and mandatory contributions are measured • Collecting information, computing tax payable at all levels of government. • Preparing separate tax accounting books, if required • Completing tax return, filing with agencies The VAT refund process: - In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times • Arranging payment or withholding income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income Total tax and contribution rate (% of commercial profits) per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred • Profit or corporate income tax in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will exceed Output • Social contributions, labor taxes paid by employer VAT in June 2018. • Property and property transfer taxes The corporate income tax audit process: • Dividend, capital gains, financial transactions taxes - An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, • Waste collection, vehicle, road and other taxes or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the Postfiling Index tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax • Time to comply with VAT refund (hours) liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. • Time to obtain VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 39 Doing Business 2020 Vietnam Paying Taxes - Vietnam Indicator Vietnam East Asia & OECD high Best Regulatory Pacific income Performance Payments (number per year) 6 20.6 10.3 3 (2 Economies) Time (hours per year) 384 173.0 158.8 49 (3 Economies) Total tax and contribution rate (% of profit) 37.6 33.6 39.9 26.1 (33 Economies) Postfiling index (0-100) 49.1 56.4 86.7 None in 2018/19 Figure – Paying Taxes in Vietnam – Score 95.0 48.2 83.7 49.1 Payments Time Total tax and contribution rate Postfiling index Figure – Paying Taxes in Vietnam and comparator economies – Ranking and Score DB 2020 Paying Taxes Score 0 100 77.7: Thailand (Rank: 68) 76.0: Malaysia (Rank: 80) 75.8: Indonesia (Rank: 81) 73.6: Regional Average (East Asia & Pacific) 69.0: Vietnam (Rank: 109) 54.2: Lao PDR (Rank: 157) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Page 40 Doing Business 2020 Vietnam Figure – Paying Taxes in Vietnam and comparator economies – Measure of Quality 80 73.4 68.8 70 56.4 Index score 60 51.0 49.1 50 40 30 18.6 20 10 0 Vietnam Indonesia Lao Malaysia Thailand East PDR Asia & Pacific Page 41 Doing Business 2020 Vietnam Details – Paying Taxes in Vietnam Tax or Payments Notes on Time (hours) Statutory tax Tax base Total tax and Notes on TTCR mandatory (number) Payments rate contribution contribution rate (% of profit) Employer paid - 1.0 147.0 17.5% gross salaries 19.74 Social Security contributions Corporate 1.0 online 112.0 20% taxable profit 12.23 income tax Employer paid - 0.0 paid jointly 3% gross salaries 3.38 0.045119559203 Health insurance 592 contributions Employer paid - 0.0 paid jointly 1% gross salaries 1.13 Unemployment insurance Income tax from 1.0 20% capital gains 1.01 transfer of land use rights Business 0.0 online and jointly VND 2,000,000 fixed fee 0.11 Licensing Tax Non Agricultural 1.0 0.3% Value of land 0.03 Land Tax Value added tax 1.0 online 125.0 10% value added 0.00 not included (VAT) Environmental 0.0 VND40,000 per by weight 0.00 Tax ton Fuel tax 1.0 included in fuel 0.00 price Employee paid - 0.0 paid jointly 1.5% gross salaries 0.00 withheld Health insurance contributions Employee paid - 0.0 paid jointly 8% gross salaries 0.00 withheld Social Security contributions Employee paid - 0.0 paid jointly 1% gross salaries 0.00 withheld Unemployment insurance Totals 6 384 37.6 Page 42 Doing Business 2020 Vietnam Details – Paying Taxes in Vietnam – Tax by Type Taxes by type Answer Profit tax (% of profit) 13.2 Labor tax and contributions (% of profit) 24.3 Other taxes (% of profit) 0.1 Page 43 Doing Business 2020 Vietnam Details – Paying Taxes in Vietnam – Measure of Quality Answer Score Postfiling index (0-100) 49.1 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? No Restrictions on VAT refund process VAT refund scheme only applies for following types: 1) investment projects; 2) export of goods and services; 3) merger and acquisition Percentage of cases exposed to a VAT audit (%) Not applicable Is there a mandatory carry forward period? Not Applicable Time to comply with VAT refund (hours) No VAT refund per 0.0 case study scenario Time to obtain VAT refund (weeks) No VAT refund per 0.0 case study scenario Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 0% - 24% Time to comply with a corporate income tax correction (hours) 3.5 96.3 Time to complete a corporate income tax correction (weeks) No tax audit per case 100 study scenario Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 44 Doing Business 2020 Vietnam Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border handling in Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as origin economy 22×24=528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, • Obtaining, preparing and submitting documents required by suppose documents are submitted to a customs agency at 8:00a.m., are processed overnight and destination economy and any transit economies can be picked up at 8:00a.m. the next day. The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours. • Covers all documents required by law and in practice, including electronic submissions of information Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the Border compliance costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. • Customs clearance and inspections Contributors are private sector experts in international trade logistics and are informed about exchange rates. • Inspections by other agencies (if applied to more than 20% of shipments) Assumptions of the case study: • Handling and inspections that take place at the economy’s port - For all 190 economies covered by Doing Business, it is assumed a shipment is in a warehouse in or border the largest business city of the exporting economy and travels to a warehouse in the largest business city of the importing economy. Domestic transport - It is assumed each economy imports 15 metric tons of containerized auto parts (HS 8708) from • Loading or unloading of the shipment at the warehouse or its natural import partner—the economy from which it imports the largest value (price times port/border quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is • Transport between warehouse and port/border the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while shipment is en - The mode of transport is the one most widely used for the chosen export or import product and route the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 45 Doing Business 2020 Vietnam Trading across Borders - Vietnam Indicator Vietnam East Asia & OECD high Best Regulatory Pacific income Performance Time to export: Border compliance (hours) 55 57.5 12.7 1 (19 Economies) Cost to export: Border compliance (USD) 290 381.1 136.8 0 (19 Economies) Time to export: Documentary compliance (hours) 50 55.6 2.3 1 (26 Economies) Cost to export: Documentary compliance (USD) 139 109.4 33.4 0 (20 Economies) Time to import: Border compliance (hours) 56 68.4 8.5 1 (25 Economies) Cost to import: Border compliance (USD) 373 422.8 98.1 0 (28 Economies) Time to import: Documentary compliance (hours) 76 53.7 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 183 108.4 23.5 0 (30 Economies) Figure – Trading across Borders in Vietnam – Score 66.0 72.6 71.0 65.2 80.3 68.9 68.6 73.9 Time Cost Time Cost Time Cost Time Cost to to to to to to to to export: export: export: export: import: import: import: import: Border Border Documentary Documentary Border Border Documentary Documentary compliance compliance compliance compliance compliance compliance compliance compliance Figure – Trading across Borders in Vietnam and comparator economies – Ranking and Score DB 2020 Trading Across Borders Score 0 100 88.5: Malaysia (Rank: 49) 84.6: Thailand (Rank: 62) 78.1: Lao PDR (Rank: 78) 71.6: Regional Average (East Asia & Pacific) 70.8: Vietnam (Rank: 104) 67.5: Indonesia (Rank: 116) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Page 46 Doing Business 2020 Vietnam Figure – Trading across Borders in Vietnam – Time and Cost Time (hours) Cost (USD) 80 373 76 400 70 350 55 290 56 Time (hours) 60 300 Cost (USD) 50 50 250 40 183 200 30 139 150 20 100 10 50 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 47 Doing Business 2020 Vietnam Details – Trading across Borders in Vietnam Characteristics Export Import Product HS 85 : Electrical machinery and equipment and HS 8708: Parts and accessories of motor vehicles parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles Trade partner Japan Japan Border Cat Lai port Cat Lai port Distance (km) 26 26 Domestic transport time (hours) 7 7 Domestic transport cost (USD) 181 181 Details – Trading across Borders in Vietnam – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required by 5.0 60.0 customs authorities Export: Clearance and inspections required by 8.0 25.0 agencies other than customs Export: Port or border handling 55.0 205.0 Import: Clearance and inspections required by 16.0 85.0 customs authorities Import: Clearance and inspections required by 8.0 0.0 agencies other than customs Import: Port or border handling 32.0 288.0 Page 48 Doing Business 2020 Vietnam Details – Trading across Borders in Vietnam – Trade Documents Export Import Bill of Lading Bill of Lading Commercial invoice Commercial invoice Packing list Packing list Customs export declaration Certificate of origin Technical standard Cargo release order SOLAS certificate Customs import declaration Inspection report SOLAS certificate Page 49 Doing Business 2020 Vietnam Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the courts The dispute in the case study involves the breach of a sales contract between two domestic (calendar days) businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. • Time to file and serve the case • Time for trial and to obtain the judgment To make the data on the time and comparable across economies, several assumptions about the case are used: • Time to enforce the judgment - The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both Cost required to enforce a contract through the courts (% of located in the economy’s largest business city. For 11 economies the data are also collected for the claim value) second largest business city. - The Buyer orders custom-made furniture, then fails to pay alleging that the goods are not of • Average attorney fees adequate quality. • Court costs - The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater. • Enforcement costs - The Seller sues the Buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000 whichever is greater. Quality of judicial processes index (0-18) - The Seller requests the pretrial attachment of the defendant’s movable assets to secure the • Court structure and proceedings (-1-5) claim. - The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods • Case management (0-6) was not adequate. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. - The Seller enforces the judgment through a public sale of the Buyer’s movable assets. • Alternative dispute resolution (0-3) Page 50 Doing Business 2020 Vietnam Enforcing Contracts - Vietnam Standardized Case Claim value VND 115,282,409 Court name People's Court of Ho Chi Minh City, District Level Court City Covered Ho Chi Minh City Indicator Vietnam East Asia & OECD high Best Regulatory Pacific income Performance Time (days) 400 581.1 589.6 120 (Singapore) Cost (% of claim value) 29.0 47.2 21.5 0.1 (Bhutan) Quality of judicial processes index (0-18) 7.5 8.1 11.7 None in 2018/19 Figure – Enforcing Contracts in Vietnam – Score 77.0 67.5 41.7 Time Cost Quality of judicial processes index Figure – Enforcing Contracts in Vietnam and comparator economies – Ranking and Score DB 2020 Enforcing Contracts Score 0 100 68.2: Malaysia (Rank: 35) 67.9: Thailand (Rank: 37) 62.1: Vietnam (Rank: 68) 53.0: Regional Average (East Asia & Pacific) 49.1: Indonesia (Rank: 139) 42.0: Lao PDR (Rank: 161) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Page 51 Doing Business 2020 Vietnam Figure – Enforcing Contracts in Vietnam – Time and Cost Time (days) Cost (% of claim value) 900 828 80 Cost (% of claim value) 70.3 800 70 700 60 Time (days) 581.1 589.6 600 47.2 50 500 425 37.9 420 403 400 40 400 31.6 29.0 30 300 21.5 16.9 20 200 100 10 0 0 East Indonesia Lao Malaysia OECD Thailand Vietnam Asia PDR high & income Pacific Page 52 Doing Business 2020 Vietnam Figure – Enforcing Contracts in Vietnam and comparator economies – Measure of Quality Vietnam 2.5 1 1 3 Indonesia 2.5 2.8 0.6 3 Lao PDR 2.5 0 1 Malaysia 2.5 4 2.5 4 Thailand 2.5 2 1 3 OECD high income 2.5 3.2 2.4 3.6 East Asia & Pacific 2.2 2.2 1.3 3 0 2 4 6 8 10 12 14 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Vietnam Indicator Time (days) 400 Filing and service 50 Trial and judgment 200 Enforcement of judgment 150 Cost (% of claim value) 29.0 Attorney fees 21 Court fees 5 Enforcement fees 3 Quality of judicial processes index (0-18) 7.5 Court structure and proceedings (-1-5) 3.0 Case management (0-6) 1.0 Court automation (0-4) 1.0 Alternative dispute resolution (0-3) 2.5 Page 53 Doing Business 2020 Vietnam Details – Enforcing Contracts in Vietnam – Measure of Quality Answer Score Quality of judicial processes index (0-18) 7.5 Court structure and proceedings (-1-5) 3.0 1. Is there a court or division of a court dedicated solely to hearing commercial cases? Yes 1.5 2. Small claims court 0.0 2.a. Is there a small claims court or a fast-track procedure for small claims? No 2.b. If yes, is self-representation allowed? n.a. 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, but manual 0.5 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 1.0 1. Time standards 1.0 1.a. Are there laws setting overall time standards for key court events in a civil case? Yes 1.b. If yes, are the time standards set for at least three court events? Yes 1.c. Are these time standards respected in more than 50% of cases? Yes 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be granted? No 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) No 0.0 clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the competent court? No 0.0 5. Are there any electronic case management tools in place within the competent court for use by judges? No 0.0 6. Are there any electronic case management tools in place within the competent court for use by lawyers? No 0.0 Court automation (0-4) 1.0 1. Can the initial complaint be filed electronically through a dedicated platform within the competent court? No 0.0 2. Is it possible to carry out service of process electronically for claims filed before the competent court? No 0.0 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 1.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public Yes through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made Yes available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.5 1. Arbitration 1.5 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— No that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes Page 54 Doing Business 2020 Vietnam 2. Mediation/Conciliation 1.0 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all their aspects (for example, definition, aim and scope of application, desig 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or No conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 55 Doing Business 2020 Vietnam Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s estate) - The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater. • Measured as percentage of estate value - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. • Court fees The hotel cannot pay back the loan, but makes enough money to operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to judicial • Lawyers’ fees liquidation and reorganization proceedings and the extent to which best insolvency practices have been implemented in each economy covered. • Assessors’ and auctioneers’ fees • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 56 Doing Business 2020 Vietnam Resolving Insolvency - Vietnam Indicator Vietnam East Asia & OECD high Best Regulatory Pacific income Performance Recovery rate (cents on the dollar) 21.3 35.5 70.2 92.9 (Norway) Time (years) 5.0 2.6 1.7 0.4 (Ireland) Cost (% of estate) 14.5 20.6 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going concern) 0 .. .. .. Strength of insolvency framework index (0-16) 8.5 7.0 11.9 None in 2018/19 Figure – Resolving Insolvency in Vietnam – Score 23.0 53.1 Recovery rate Strength of insolvency framework index Figure – Resolving Insolvency in Vietnam and comparator economies – Ranking and Score DB 2020 Resolving Insolvency Score 0 100 76.8: Thailand (Rank: 24) 68.1: Indonesia (Rank: 38) 67.0: Malaysia (Rank: 40) 40.9: Regional Average (East Asia & Pacific) 38.0: Vietnam (Rank: 122) 0.0: Lao PDR (Rank: 168) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Page 57 Doing Business 2020 Vietnam Figure – Resolving Insolvency in Vietnam – Time and Cost Time (years) Cost (% of estate) 6 25 21.6 5.0 20.6 Cost (% of estate) 5 20 18.0 Time (years) 4 14.5 15 3 2.6 10.0 9.3 10 2 1.7 1.5 1.1 1.0 1 5 0 0 East Indonesia No Malaysia OECD Thailand Vietnam Asia Practice high & Lao income Pacific PDR Page 58 Doing Business 2020 Vietnam Figure – Resolving Insolvency in Vietnam and comparator economies – Measure of Quality Vietnam 3 2.5 1 2 Indonesia 5 3 2 0.5 Lao PDR 2 2 0 0.5 Malaysia 2 3 2 0.5 Thailand 5 2.5 2 3 OECD high income 5.3 2.8 2.1 1.9 East Asia & Pacific 3.7 2.3 1.3 1 0 2 4 6 8 10 12 14 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Vietnam and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 90 81.0 80 70.1 70 65.5 60 50 40 35.5 30 21.3 20 10 0 No Practice Vietnam Indonesia Lao PDR Malaysia Thailand East Asia & Pacific Page 59 Doing Business 2020 Vietnam Details – Resolving Insolvency in Vietnam Indicator Answer Score Proceeding liquidation (after an According to Articles 5.3 and 5.4 of the Law on Bankruptcy No. 51/2014/QH13, the legal representative/owner of attempt at Mirage has the obligation to file a petition for commencement of bankruptcy procedures when Mirage becomes reorganization) insolvent. With the assumption that the Mirage's management wants to keep the company operating, they will initiate reorganization and secured creditors will be subject to the automatic stay of reorganization. BizBank, the main creditor, however, will not favor reorganization and will reject the plan. For this reason, Mirage's reorganization will convert into liquidation and the court will issue a decision to commence procedures for liquidation of assets according to Article 107 of the Law on Bankruptcy. Outcome piecemeal sale The bank will insist on selling the property piecemeal to recoup its money as soon as possible. The court will endorse this and approve piecemeal sale, which will be conducted by an auctioneer in a public auction. Time (in years) 5.0 A reorganization procedure that is then converted into liquidation will approximately take 5 years in practice. First, it will take around 2 years to formally initiate insolvency proceedings, convene creditors, prepare the list of claims and draft a reorganization plan. Once creditors fail to approve the reorganization plan, the procedure will be converted into liquidation, which will take 1 more year. After that, all assets of the debtor will be collected together with a view to distribute them among creditors. This process will take around 2 years and will require conducting several auctions. There are many delays that occur in insolvency proceedings. Most of them are due to the debtor's manipulations and excessive formalism of judges. Cost (% of estate) 14.5 The costs associated with the case would amount to approximately 15% of the value of the debtor's estate. The costs incurred during the entire insolvency process mainly includes attorney fees (6%), insolvency representative fees (2%), fees of accountants, assessors, inspectors and other professionals (4%), and auctioneer fees (3%). Recovery rate 21.3 (cents on the dollar) Page 60 Doing Business 2020 Vietnam Details – Resolving Insolvency in Vietnam – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 8.5 Commencement of proceedings index (0-3) 2.5 What procedures are available to a DEBTOR when commencing insolvency proceedings? (a) Debtor may file for 1.0 both liquidation and reorganization Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (b) Yes, but a creditor 0.5 may file for liquidation only What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) (a) Debtor is 1.0 Debtor is generally unable to pay its debts as they mature (b) The value of debtor's liabilities exceeds the value generally unable to of its assets pay its debts as they mature Management of debtor's assets index (0-6) 3.0 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the No 0.0 debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? Yes 1.0 Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of No 0.0 insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (c) No priority is 0.0 assigned to post- commencement creditors Reorganization proceedings index (0-3) 2.0 Which creditors vote on the proposed reorganization plan? (c) Other 1.0 Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as No 0.0 what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class vote Yes 1.0 separately and are creditors in the same class treated equally? Creditor participation index (0-4) 1.0 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency No 0.0 representative? Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0 Does the insolvency framework provide that a creditor has the right to request information from the insolvency No 0.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting Yes 1.0 creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 61 Doing Business 2020 Vietnam Employing Workers Doing Business presents detailed data for the employing workers indicators on the Doing Business website (http://www.doingbusiness.org). The study does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the worker and the (i) whether fixed-term contracts are prohibited for permanent business are used. tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the maximum probationary period; (iv) minimum The worker: wage;(v) ratio of minimum wage to the average value added per - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. worker. - Is a full-time employee. - Is not a member of the labor union, unless membership is mandatory. Working hours (i) maximum number of working days allowed per week; (ii) The business: premiums for work: at night, on a weekly rest day and overtime; - Is a limited liability company (or the equivalent in the economy). (iii) whether there are restrictions on work at night, work on a - Operates a supermarket or grocery store in the economy’s largest business city. For 11 weekly rest day and for overtime work; (iv) length of paid annual economies the data are also collected for the second largest business city. leave. - Has 60 employees. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the Redundancy rules food retail sector and they apply even to firms that are not party to them. (i) whether redundancy can be basis for terminating workers; (ii) - Abides by every law and regulation but does not grant workers more benefits than those whether employer needs to notify and/or get approval from third mandated by law, regulation or (if applicable) collective bargaining agreements. party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether the law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments, and (iii) penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected. Page 62 Doing Business 2020 Vietnam Employing Workers - Vietnam Details – Employing Workers in Vietnam Answer Hiring Fixed-term contracts prohibited for permanent tasks? No Maximum length of a single fixed-term contract (months) 36.0 Maximum length of fixed-term contracts, including renewals (months) 72.0 Minimum wage applicable to the worker assumed in the case study (US$/month) 183.3 Ratio of minimum wage to value added per worker 0.6 Maximum length of probationary period (months) 1.0 Working hours Standard workday 8.0 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 30.0 Premium for work on weekly rest day (% of hourly pay) 0.0 Premium for overtime work (% of hourly pay) 50.0 Restrictions on night work? No Restrictions on weekly holiday? No Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 12.0 Paid annual leave for a worker with 5 years of tenure (working days) 13.0 Paid annual leave for a worker with 10 years of tenure (working days) 14.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 13.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? No Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? Yes Third-party approval if nine workers are dismissed? Yes Retraining or reassignment obligation before redundancy? Yes Priority rules for redundancies? No Priority rules for reemployment? No Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 0.0 Notice period for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 0.0 Notice period for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 0.0 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 0.0 Severance pay for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 8.7 Severance pay for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 21.7 Page 63 Doing Business 2020 Vietnam Severance pay for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 43.3 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 24.6 Unemployment protection after one year of employment? Yes Page 64 Doing Business 2020 Vietnam Business Reforms in Vietnam From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. =Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2020 Getting Credit: Vietnam improved access to credit information by distributing data from retailers. Paying Taxes: Vietnam made paying taxes easier by upgrading the information technology infrastructure used by the General Department of Taxation. DB2019 Starting a Business: Vietnam made starting a business easier by publishing the notice of incorporation online and by reducing the cost of business registration. Paying Taxes: Vietnam made paying taxes easier by no longer requiring hard copy submission of the value added tax return and allowing joint payment of the business license tax and value added tax. Vietnam also made paying taxes less costly by reducing the employer’s contribution to the labor fund. Enforcing Contracts: Vietnam made enforcing contracts easier by making judgments rendered at all levels in commercial cases available to the public online. DB2018 Getting Electricity: Vietnam increased the reliability of power supply by rolling out a Supervisory Control and Data Acquisition (SCADA) automatic energy management system for the monitoring of outages and the restoration of service. Getting Credit: Vietnam strengthened access to credit by adopting a new civil code that broadens the scope of assets that can be used as collateral. Paying Taxes: Vietnam made paying taxes by introducing an online platform for filing social security contributions. At the same time, Vietnam restricted VAT cash refunds to exporters. Trading across Borders: Vietnam made exporting and importing easier by upgrading the automated cargo clearance system and extending the operating hours of the customs department. Enforcing Contracts: Vietnam made enforcing contracts easier by adopting a new code of civil procedure and by introducing a consolidated law on voluntary mediation. DB2017 Starting a Business: Vietnam made starting a business more difficult by requiring entrepreneurs to receive approval of the seal sample before using it. Protecting Minority Investors: Vietnam strengthened minority investor protections by making it easier to sue directors in cases of prejudicial transactions between interested parties, by increasing shareholder rights and role in major corporate decisions, by strengthening the ownership and control structures of companies and by increasing corporate transparency requirements. Paying Taxes: Vietnam made paying taxes easier and less costly by streamlining the administrative process of complying with tax obligations and abolishing environmental protection fees. Trading across Borders: Vietnam made exporting and importing easier by implementing electronic customs clearance system. DB2016 Starting a Business: Vietnam made starting a business easier by reducing the time required to get the company seal engraved and registered. Getting Electricity: The utility in Vietnam reduced the time required for getting an electricity connection by reducing delays and increasing efficiency in approving connection applications and designs for connection works. Getting electricity was also made easier by eliminating the need to obtain a substation certification from the Fire Fighters Prevention Department for connections to the medium-voltage grid. Getting Credit: Vietnam guaranteed borrowers’ right to inspect their credit data while the new credit bureau expanded borrower coverage, improving the credit information system. Paying Taxes: Vietnam made paying taxes less costly for companies by reducing the corporate income tax rate—and made it easier by reducing the number of procedures and documents for filing VAT and social security contributions, reducing the number of filings for VAT and replacing quarterly filings of corporate income tax with quarterly advance payments. On the other hand, Vietnam increased the rate for social security contributions paid by employers. Resolving Insolvency: Vietnam made resolving insolvency easier by clarifying and simplifying provisions on liquidation and reorganization, modifying the standard for commencement of insolvency proceedings, changing provisions on voidable transactions, regulating the profession of insolvency trustees and establishing the rules for enterprise asset managers. DB2015 Getting Credit: Vietnam improved its credit information system by establishing a new credit bureau. Page 65 Doing Business 2020 Vietnam DB2014 Getting Credit: Vietnam improved its credit information system through a decree setting up a legal framework for the establishment of private credit bureaus. Protecting Minority Investors: Vietnam strengthened investor protections by introducing greater disclosure requirements for publicly held companies in cases of related-party transactions. Paying Taxes: Vietnam made paying taxes more costly for companies by increasing employers' social security contribution rate. Employing Workers: Vietnam abolished priority rules for redundancy dismissals or layoffs and increased the minimum wage. DB2013 Starting a Business: Vietnam made starting a business easier by allowing companies to use self-printed value added tax invoices. DB2012 Protecting Minority Investors: Vietnam strengthened investor protections by requiring higher standards of accountability for company directors. DB2011 Starting a Business: Vietnam eased company start-up by creating a one-stop shop that combines the processes for obtaining a business license and tax license and by eliminating the need for a seal for company licensing. Dealing with Construction Permits: Vietnam made dealing with construction permits easier by reducing the cost to register newly completed buildings by 50% and transferring the authority to register buildings from local authorities to the Department of National Resources and Environment. Getting Credit: Vietnam improved its credit information system by allowing borrowers to examine their own credit report and correct errors. Paying Taxes: The government of Vietnam eased paying taxes by reducing corporate income tax rate. DB2010 Paying Taxes: Vietnam made paying taxes less costly for companies by reducing the corporate income and value added tax rates and eliminating the surtax on income from the transfer of land use rights. Trading across Borders: Vietnam reduced the time for exporting and importing by implementing World Trade Organization rules for customs administration; increasing competition in the logistics industry also helped reduce delays. DB2009 Getting Credit: Vietnam’s public credit registry extended the coverage of historical credit information that it distributes from 2 years to 5, expanding its coverage of individuals and firms. DB2008 Getting Credit: Vietnam strengthened its secured transactions system by expanding the range of assets that can be used as collateral and allowing a general description of collateral in the security agreement. Protecting Minority Investors: Vietnam strengthened investor protections by increasing disclosure requirements for both regular and related-party transactions. Page 66 Doing Business 2020 Vietnam Page 67